Ring, Incorporated’s income statement for the most recent month is given below.
Refer to the original data.
If Store Q sales increase by $30,000 with no change in fixed expenses, the overall
company net operating income should:
A. increase by $3,750
B. increase by $7,500
C. increase by $12,000
D. increase by $18,000
Answer:
Reference: 8-23
Dukeman Corporation manufactures and sells a single product. The company uses units
as the measure of activity in its flexible budgets. During February, the company
budgeted for 7,100 units, but its actual level of activity was 7,060 units. The company
has provided the following data concerning the formulas to be used in its budgeting:
The net operating income in the planning budget for February would be closest to:
A) $16,930
B) $17,350
C) $16,885
D) $16,695
Answer:
Seroka Corporation estimates that its variable manufacturing overhead is $6.90 per
machine-hour and its fixed manufacturing overhead is $745,290 per period.
If the denominator level of activity is 9,100 machine-hours, the predetermined overhead
rate would be:
A. $88.80
B. $690.00
C. $6.90
D. $81.90
Answer:
Olis Corporation sells a product for $130 per unit. The product’s current sales are
28,900 units and its break-even sales are 25,721 units. What is the margin of safety in
dollars?
A. $413,270
B. $3,343,730
C. $2,504,667
D. $3,757,000
Answer:
Data concerning Knipp Corporation’s single product appear below:
Fixed expenses are $587,000 per month. The company is currently selling 4,000 units
per month. The marketing manager would like to introduce sales commissions as an
incentive for the sales staff. The marketing manager has proposed a commission of $16
per unit. In exchange, the sales staff would accept a decrease in their salaries of $57,000
per month. (This is the company’s savings for the entire sales staff.) The marketing
manager predicts that introducing this sales incentive would increase monthly sales by
100 units. What should be the overall effect on the company’s monthly net operating
income of this change?
A. increase of $55,400
B. increase of $745,800
C. increase of $9,800
D. decrease of $104,200
Answer:
The Cabinet Shoppe is considering the addition of a new line of kitchen cabinets to its
current product lines. Expected cost and revenue data for the new cabinets are as
follows:
If the new cabinets are added, it is expected that the contribution margin of other
product lines at the cabinet shop will drop by $20,000 per year.
If the new cabinet product line is added next year, the increase in net operating income
resulting from this decision would be:
A. $80,000
B. $225,000
C. $125,000
D. $105,000
Answer:
The management of Freshwater Corporation is considering dropping product C11B.
Data from the company’s accounting system appear below:
All fixed expenses of the company are fully allocated to products in the company’s
accounting system. Further investigation has revealed that $211,000 of the fixed
manufacturing expenses and $122,000 of the fixed selling and administrative expenses
are avoidable if product C11B is discontinued.
According to the company’s accounting system, what is the net operating income earned
by product C11B?
A. $74,000
B. $(521,000)
C. $(74,000)
D. $521,000
Answer:
Callander Corporation is a wholesaler that sells a single product. Management has
provided the following cost data for two levels of monthly sales volume. The company
sells the product for $151.60 per unit.
The best estimate of the total monthly fixed cost is:
A. $846,000
B. $886,050
C. $365,400
D. $926,100
Answer:
The controller of Ferrence Company estimates the amount of materials handling
overhead cost that should be allocated to the company’s two products using the data that
are given below:
The total materials handling cost for the year is expected to be $16,486.40.
If the materials handling cost is allocated on the basis of material moves, how much of
the total materials handling cost should be allocated to the specialty windows? (Round
off your answer to the nearest whole dollar.)
A. $3,266
B. $9,274
C. $8,243
D. $6,595
Answer:
Hereford Corporation has provided the following data for February.
Required:
a. Compute the budget variance for February. Show your work!
b. Compute the volume variance for February. Show your work!
Answer:
Able Control Company, which manufactures electrical switches, uses a standard cost
system in which manufacturing overhead costs are applied to units of product on the
basis of standard direct labor-hours (DLHs). The standard overhead costs are shown
below:
*Based on 300,000 DLHs per month.
The following information is available for the month of October:
– Plans called for the production of 60,000 switches.
– 56,000 switches were actually produced.
– 275,000 direct labor-hours were worked at a total cost of $2,550,000.
– Actual variable manufacturing overhead costs were $2,340,000.
– Actual fixed manufacturing overhead costs were $3,750,000.
The variable overhead efficiency variance for October was:
A. $40,000 Favorable
B. $60,000 Favorable
C. $160,000 Unfavorable
D. $210,000 Unfavorable
Answer:
Sommers Fabrication Corporation has a standard cost system in which it applies
manufacturing overhead to products on the basis of standard machine-hours (MHs) at
$9.70 per MH. The company budgeted its fixed manufacturing overhead cost at
$67,000 for the month. During the month, the actual total variable manufacturing
overhead was $66,660 and the actual total fixed manufacturing overhead was $70,000.
The actual level of activity for the period was 6,600 MHs. What was the total of the
variable overhead rate and fixed manufacturing overhead budget variances for the
month?
A. $2,640 unfavorable
B. $5,640 favorable
C. $2,640 favorable
D. $5,640 unfavorable
Answer:
Karo Corporation has provided the following data concerning its direct labor costs for
December:
The Labor Rate Variance for December would be recorded as a:
A. Credit of $9,086
B. Debit of $9,086
C. Credit of $8,428
D. Debit of $8,428
Answer:
Reference: 8A-17
Buell Corporation has provided the following data for June.
The budget variance for June is:
A) $5,740 F
B) $3,610 F
C) $3,610 U
D) $5,740 U
Answer:
Selected financial data from Osterville Company for the most recent year appear below:
The income tax rate is 40%.
Net income as a percentage of sales was:
A. 5%
B. 3%
C. 2.25%
D. 1.75%
Answer:
Castle Company uses the FIFO method in its process costing system. In the Cutting
Department in June, units were four-fifths complete with respect to conversion in the
beginning work in process inventory and one-third complete with respect to conversion
in the ending work in process inventory. Other data for the department for June follow:
The cost per equivalent unit for conversion cost is closest to:
A. $1.40
B. $1.35
C. $1.21
D. $1.64
Answer:
Froment Corporation uses the weighted-average method in its process costing system.
This month, the beginning inventory in the first processing department consisted of 200
units. The costs and percentage completion of these units in beginning inventory were:
A total of 7,900 units were started and 7,400 units were transferred to the second
processing department during the month. The following costs were incurred in the first
processing department during the month:
The ending inventory was 65% complete with respect to materials and 25% complete
with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all
cases, select the answer that is the closest to the answer you computed. To reduce
rounding error, carry out all computations to at least three decimal places.
The cost of ending work in process inventory in the first processing department
according to the company’s cost system is closest to:
A. $28,359
B. $18,433
C. $7,090
D. $11,809
Answer:
Nando Company uses the weighted-average method in its process costing system.
Department J is the second of three sequential processes at the company. During
October, Department J collected the following data:
All materials are added at the beginning of the process.
The total cost assigned to units transferred out during October was:
A. $264,600
B. $316,000
C. $342,000
D. $358,400
Answer:
Getchman Marketing, Inc., a merchandising company, reported sales of $592,500 and
cost of goods sold of $305,000 for April. The company’s total variable selling expense
was $37,500; its total fixed selling expense was $16,000; its total variable
administrative expense was $35,000; and its total fixed administrative expense was
$38,900. The cost of goods sold in this company is a variable cost.
The gross margin for April is:
A. $287,500
B. $215,000
C. $537,600
D. $160,100
Answer:
National Telephone company has been forced by competition to put much more
emphasis on planning and controlling its costs. Accordingly, the company’s controller
has suggested initiating a formal budgeting process. Which of the following steps will
NOT help the company gain maximum acceptance by employees of the proposed
budgeting system?
A. Implementing the change quickly.
B. Including in departmental responsibility reports only those items that are under the
department manager’s control.
C. Demonstrating top management support for the budgeting program.
D. Ensuring that favorable deviations of actual results from the budget, as well as
unfavorable deviations, are discussed with the responsible managers.
Answer:
Reference: 8-35
Sande Corporation makes a product with the following standard costs:
In November the companys budgeted production was 2,900 units but the actual
production was 3,000 units. The company used 27,670 grams of the direct material and
1,390 direct labor-hours to produce this output. During the month, the company
purchased 31,700 grams of the direct material at a cost of $196,540. The actual direct
labor cost was $29,607 and the actual variable overhead cost was $2,502.
The company applies variable overhead on the basis of direct labor-hours. The direct
materials purchases variance is computed when the materials are purchased.
The labor efficiency variance for November is:
A) $2,530 U
B) $2,530 F
C) $2,343 F
D) $2,343 U
Answer:
Deschambault Inc. is working on its cash budget for December. The budgeted
beginning cash balance is $14,000. Budgeted cash receipts total $127,000 and budgeted
cash disbursements total $126,000. The desired ending cash balance is $40,000. To
attain its desired ending cash balance for December, the company needs to borrow:
A. $25,000
B. $0
C. $55,000
D. $40,000
Answer:
A tile manufacturer has supplied the following data:
If the company increases its unit sales volume by 3% without increasing its fixed
expenses, then total net operating income should be closest to:
A. $3,000
B. $101,371
C. $115,480
D. $103,000
Answer:
Balmforth Products, Inc. makes and sells a single product called a Bik. It takes three
yards of Material A to make one Bik. Budgeted production of Biks for the next five
months is as follows:
The company wants to maintain monthly ending inventories of Material A equal to 20%
of the following month’s production needs. On January 31, this target had not been
attained since only 2,000 yards of Material A were on hand. The cost of Material A is
$0.80 per yard. The company wants to prepare a Direct Materials Purchases Budget.
The desired ending inventory of Material A for the month of March is:
A. 9,300 yards
B. 7,140 yards
C. 3,100 yards
D. 8,400 yards
Answer:
The weighted-average method of process costing differs from the FIFO method of
process costing in that the weighted-average method:
A. can be used under any cost flow assumption.
B. does not require the use of predetermined overhead rates.
C. keeps costs in the beginning inventory separate from current period costs.
D. does not consider the degree of completion of units in the beginning work in process
inventory when computing equivalent units of production.
Answer:
In a job-order costing system, the use of direct materials that have been previously
purchased is recorded as a debit to:
A. Raw Materials inventory.
B. Work in Process inventory.
C. Finished Goods inventory.
D. Manufacturing Overhead.
Answer:
The following partially completed T-accounts summarize the transactions of Belson
Company for last year:
At the end of the year, the company closes out the balance in the Manufacturing
Overhead account to Cost of Goods Sold.
The manufacturing overhead applied is:
A. $28,000
B. $29,000
C. $30,000
D. $38,000
Answer:
The manufacturing overhead budget at Latronica Corporation is based on budgeted
direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will
be required in August. The variable overhead rate is $8.60 per direct labor-hour. The
company’s budgeted fixed manufacturing overhead is $132,770 per month, which
includes depreciation of $24,850. All other fixed manufacturing overhead costs
represent current cash flows. The company recomputes its predetermined overhead rate
every month. The predetermined overhead rate for August should be:
A. $8.60
B. $27.30
C. $23.80
D. $18.70
Answer:
Designing a new product is an example of a:
A. Unit-level activity.
B. Batch-level activity.
C. Product-level activity.
D. Facility-level activity.
Answer:
Threets Corporation’s most recent comparative balance sheet appears below:
The company’s net income for the year was $109 and it paid a cash dividend. It did not
dispose of any property, plant, and equipment during the year. The company did not
issue any bonds payable or repurchase any of its own common stock.
The net cash provided by (used in) investing activities for the year was:
A. $(60)
B. $(57)
C. $57
D. $60
Answer:
Reference: 8-39
The Geurtz Company uses standard costing. The company makes and sells a single
product called a Roff. The following data are for the month of August:
– Actual cost of direct material purchased and used: $65,560
– Material price variance: $5,960 unfavorable
– Total materials variance: $22,360 unfavorable
– Standard cost per pound of material: $4
– Standard cost per direct labor-hour: $5
– Actual direct labor-hours: 6,500 hours
– Labor efficiency variance: $3,500 favorable
– Standard number of direct labor-hours per unit of Roff: 2 hours
– Total labor variance: $400 unfavorable
The standard material allowed to produce one unit of Roff was:
A) 1 pound
B) 4 pounds
C) 3 pounds
D) 2 pounds
Answer: